District of Columbia Councilmembers Seek Clarification on Non-Compete Ban

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Since we last wrote about DC’s sweeping ban on non-competes (the “Act”), there have been many questions and concerns, not surprisingly. And now those have spilled over into deliberations before the DC Council, leading to Councilmember Elissa Silverman’s introduction of the Non-Compete Conflict of Interest Clarification Amendment Act of 2021 on May 21, 2021. Councilmember Silverman and others hope to limit the new non-compete law before it gets funded with an effective date of March 16, 2021. While helpful, the Silverman proposals are extremely limited in scope, and so others have chimed in, leading to a potential delay of the Act’s implementation.

The Silverman proposals

Councilmember Silverman originally spearheaded the Act and was among the cohort of eight councilmembers who previously introduced the Act in October 2019. She has now proposed three changes to the Act. First, her proposal would limit the Act’s ban on prohibiting simultaneous employment. Instead, the Silverman proposal would permit some “bona fide conflict of interest” policies, defined as workplace policies that would bar employees from accepting “money or a thing of value from a person during the employee’s employment … because the employer reasonably believes the employee’s acceptance … will cause the employer to” conduct its business in an unethical manner or violate applicable local, state, or federal laws or rules. As explained to the Washington City Paper, she “was contacted by universities and others who … were concerned the law would stop them from identifying and preventing conflicts of interest among employees—for example, admissions staff simultaneously consulting for students on their applications or researchers accepting federal research grants and then taking the knowledge gained to a private employer.”

Second, while the Act does not forbid confidentiality agreements, the Silverman proposal seeks to expand the definition of such agreements. As it stands, the Act defines these to be those that prohibit “the employee from disclosing the employer’s confidential, proprietary or sensitive information, client list, customer list, or a trade secret.” Silverman, however, hopes to expand the definition so that the Act carves out confidentiality agreements that prohibit not only the disclosure of protected information but also the use of such information.

Third, the proposal would amend the Minimum Wage Revision Act of 1992 by incorporating the Act’s notice language into the already existing Notice of Hire Form disseminated by employers to their employees.

Current fiscal impact and July 14th public hearing

In its June 30, 2021, report and recommendation, the DC Council’s Committee on Labor and Workforce Development proposed full funding of the Act at $675,910 over the next four years. Interestingly, the Committee recommended deferring the Act’s implementation until April 1, 2022, to consider “changes to respond to business community concerns raised after final passage of the” Act.

Indeed, during the July 14, 2021, public hearing to consider the Silverman proposals, Councilmember Brooke Pinto (who twice voted in support of the Act) proposed going further: she would limit the Act to certain key employees (and exempt those subject to a professional code of conduct) and to a shorter timeframe so that there is no outright ban on non-compete provisions. In particular, under the Pinto plan, an employee with broad access to confidential information could not (1) moonlight if it meant exposing the information to or using the information by a competitor or (2) work for competitor for six months upon leaving the former employment if the employee earns more than $80,000 per year in total compensation and the former employer continues to pay the full salary for those six months, capped at $150,000 (less any signing bonuses). Councilmember Pinto also suggested forbidding moonlighting by those who are uniquely identified with their employer or its brand.

Takeaways

At this juncture, in light of the debate surrounding the Act, we suspect that the Act will not be implemented until much later, perhaps in the spring of 2022. Councilmember Silverman—the biggest proponent of the Act and the chairperson of the Committee on Labor and Workforce Development—has since changed her tune, recognizing that the broadest ban on non-competes deserves a more nuanced analysis than previously understood. While she has recommended full funding of the Act, she has opened the floor to hear the public concerns. And with councilmember Pinto (also a previous supporter of the Act’s original language) also modifying her stance, we could potentially see a different version of the Act before its full implementation. Time will tell.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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